EVOLVED EXPENDABLE 

LAUNCH VEHICLE

Introducing Competition 

into National Security 

Space Launch 

Acquisitions

Statement of Cristina Chaplain, Director, 

Acquisition and Sourcing Management

Testimony

Before the Committee on 

Appropriations, U.S. Senate, 

Subcommittee on Defense

For Release on Delivery 

Expected at 10:00 a.m. EST

March 5, 2014

GAO-14-259T

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-259T, a testimony 

before the Committee on Appropriations, U.S. 

Senate, Subcommittee on Defense

March 5, 2014

EVOLVED EXPENDABLE LAUNCH VEHICLE

Introducing Competition into National Security Space 

Launch Acquisitions

Why GAO Did This Study

DOD’s Evolved Expendable Launch 

Vehicle (EELV) program is the primary 

provider of launch vehicles for U.S. 

military and intelligence satellites. DOD 

expects to spend about $9.5 billion 

over the next 5 years acquiring launch 

hardware and services through the 

program, during which time it will also 

be working to certify new launch 

providers. Certified launch providers 

may compete for up to 14 launches, 

likely beginning in fiscal year 2015. 

Until now, the United Launch Alliance 

(ULA) has been the sole provider of 

launch services through the EELV 

program. Because of the importance of 

the national security space launch 

enterprise, GAO has been asked to 

look at many aspects of the EELV 

program over the past 10 years.

This testimony discusses (1) changes 

in the EELV acquisition strategy since 

its inception, including DOD’s 

December 2013 contract modification 

with ULA, and (2) the upcoming 

competition for up to 14 EELV-class 

launches and the implications to DOD, 

ULA, and potential launch providers of 

two possible DOD approaches to 

structuring competitive launch 

proposals. The testimony is based on 

the body of work GAO has performed 

on the EELV program from June 2004 

to March 2014. 

What GAO Recommends

GAO is not making recommendations 

in this statement but has made 

recommendations in its previous work 

to strengthen EELV acquisitions, such 

as improving DOD oversight and 

addressing knowledge gaps. DOD 

generally concurred and took action to 

address GAO’s recommendations. 

What GAO Found

The Department of Defense (DOD) began the Evolved Expendable Launch 

Vehicle (EELV) program in 1995 to provide a new generation of launch vehicles 

to ensure affordable access to space for government satellites. In November 

1997, based on commercial forecasts at that time, the Office of the Secretary of 

Defense (OSD) approved maintaining competition between two contractors, and 

in 1998, DOD competitively awarded “other transaction agreements” to Boeing 

and Lockheed Martin for the development and the associated launch 

infrastructure to meet EELV program requirements. In 2005, DOD revised the 

EELV acquisition strategy to reflect the collapse of the commercial launch market 

and the ensuing erosion of the industrial base which DOD believed threatened its 

assured access to space. In acknowledging the government’s role as the primary 

EELV customer, the new strategy maintained assured access to space by 

funding two product lines of launch vehicles. Shortly afterwards, Boeing and 

Lockheed Martin announced plans to consolidate their launch operations into a 

joint venture—United Launch Alliance (ULA). According to DOD, the EELV 

program was focused on mission success in the ensuing years, until 2010, when 

DOD officials predicted EELV program costs would increase at an unsustainable 

rate. In light of new EELV program costs estimates, DOD recognized the need to 

reorganize the way it acquired launch services. The 2011 EELV acquisition 

strategy advocated a steady launch vehicle production rate that would yield both 

economic benefits to the government through larger lot buys of vehicles, and a 

predictable production tempo over time to help stabilize the launch industrial 

base. It also introduced the government’s intent to allow competition in the EELV 

program. 

In addition to revising its acquisition strategy, DOD undertook significant efforts to 

obtain greater insight into program costs in advance of contract negotiations with 

ULA. In December 2013, DOD signed a contract modification with ULA, 

committing the government to buy 35 launch vehicle booster cores over a 5-year 

period, and the associated capability to launch them. The new contract 

represents significant effort on the part of DOD to negotiate better launch prices 

through its improved knowledge of contractor costs, and DOD officials expect the 

new contract to realize significant savings, primarily through stable unit pricing for 

all launch vehicles. DOD is also leading a broader competition for up to 14 

additional launches, expected to begin in fiscal year 2015.

In advance of the upcoming competition for up to 14 EELV-class launches, DOD 

is considering several approaches to how it will require competitive proposals to 

be structured. If DOD requires offers be structured similar to the way it currently 

contracts with ULA, there could be benefits to DOD and ULA as both are familiar 

with this approach, but potential burdens to new entrants who would have to 

change current business practices. Alternatively, if DOD implements a 

commercial approach to the proposals, DOD could lose insight into contractor 

cost or pricing, as this type of data cannot be required under a commercial item 

acquisition by the Federal Acquisition Regulation. DOD could also require a 

combination of elements from each of these approaches, or develop new 

contract requirements for this competition.

View GAO-14-259T. For more information, 

contact Cristina Chaplain at (202) 512-4841 or 

chaplainc@gao.gov. 
Chairman Durbin, Ranking Member Cochran, and Members of the 

Subcommittee:

I am pleased to be here today to discuss efforts to reintroduce 

competition in the Department of Defense’s Evolved Expendable Launch 

Vehicle (EELV) program—our nation’s primary provider of launch vehicles 

for U.S. military and intelligence satellites. The Department of Defense 

(DOD) expects to spend about $9.5 billion over the next five years 

acquiring launch hardware and services through its EELV program, 

during which time it will also be working to certify new launch providers to 

compete for launch contract awards against the incumbent and heretofore 

sole launch provider, the United Launch Alliance (ULA). The most recent 

total program cost was estimated at nearly $70 billion through the end of 

the program in 2030.1

Today I will discuss (1) changes in the EELV acquisition strategy since its 

inception, including DOD’s December 2013 contract modification with 

ULA, and (2) the upcoming competition for up to 14 EELV-class launches 

and the implications to DOD, ULA and potential launch providers of two 

possible DOD approaches to structuring competitive launch proposals. 

My testimony is based on the body of work we have performed on the 

EELV program in recent years and related reports issued from June 2004 

to March 2014.

In view of the importance of the national security 

space launch enterprise, we have been asked to look at many aspects of 

the EELV program over the past ten years, including overall progress of 

the program, program oversight, uncertainties related to the formation of 

ULA, development of the most recent launch vehicle acquisition strategy, 

DOD implementation of a certification process for new launch companies, 

and DOD’s upcoming space launch competition.

2

 

1 The Office of the Secretary of Defense, Cost Assessment and Program Evaluation 

conducted an independent cost estimate based on the EELV programmatic forecast dated 

June 2012.

We have interviewed DOD and industry officials, 

conducted contract reviews, assessed knowledge of the industrial base, 

and analyzed program acquisition strategies, among other things. All 

work on which this testimony is based was performed in accordance with 

generally accepted government auditing standards. Those standards 

2 This testimony is based in part on a recent launch report we prepared for the Homeland 

Security and Governmental Affairs Committee, Permanent Subcommittee on 

Investigations: See GAO, The Air Force’s Evolved Expendable Launch Vehicle 

Competitive Procurement, GAO-14-377R (Washington, D.C.: March 4, 2014).
require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions 

based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on 

our audit objectives.

DOD began the EELV program in 1995 to provide a new generation of 

launch vehicles to ensure affordable access to space for government 

satellites. DOD planned to choose a single contractor with the most 

reliable and cost-effective design, but in November 1997, the Office of the 

Secretary of Defense (OSD) approved maintaining competition between 

two contractors. The decision was based on commercial forecasts at that 

time, which showed growth in the launch market would support more than 

one provider, and that the resulting competition would translate into lower 

prices for the government. In 1998, DOD competitively awarded “other 

transaction agreements” to Boeing and Lockheed Martin for the 

development of their respective families—the Delta IV and Atlas V 

vehicles—and the associated launch infrastructure to meet EELV 

program requirements.3

The robust commercial launch market upon which OSD based the 

acquisition strategy of maintaining competition between two launch 

companies never materialized, and estimated prices for future contracts 

along with total program costs, increased. In 2005, DOD revised the 

EELV acquisition strategy to reflect the collapse of the commercial launch 

market and the ensuing erosion of the industrial base which DOD 

believed threatened its assured access to space. The new strategy 

acknowledged the government’s role as the primary EELV customer, and 

the need to maintain assured access to space by funding two launch 

vehicle families. The new strategy addressed language from the 2004 

National Space Transportation Policy directing DOD to fully fund fixed 

costs for EELV, and DOD shifted its focus to mission success above all 

else. The revised strategy included two negotiated contracts for each 

 

3 Additional Forms of Transactions Authorized – The Secretary of Defense and the 

Secretary of each military department may enter into transactions (other than contracts, 

cooperative agreements, and grants) under the authority of this subsection in carrying out 

basic, applied, and advanced research projects. The authority under the this subsection is 

in addition to the authority provided in section 2358 of this title to use contracts, 

cooperative agreements, and grants in carrying out such projects. 10 U.S.C. § 2371(a).

Changes in the EELV 

Acquisition Strategy 

since its Inception
company, one paying for launch capability and the other for launch 

services. DOD officials acknowledge that the contract structure was 

difficult to understand, with the “capability” contract paying for items such 

as overhead on launch pads and production facilities, engineering 

support, and administrative salaries, and the “services” contract paying 

for launch vehicle hardware and touch labor, or labor associated with 

building the vehicles.

Shortly after DOD revised the acquisition strategy in 2005, Boeing and 

Lockheed Martin announced plans to consolidate their launch operations 

into a joint venture combining production, engineering, test, and launch 

operations associated with U.S. government launches. By joining 

together, the companies said they could provide the government with

assured access to space at the lowest possible cost. The Federal Trade 

Commission was initially opposed to the ULA joint venture because of the 

likelihood it would limit competition in the launch industry, but DOD stated 

that having two launch vehicle families presented unique national security 

benefits that outweighed the loss of competition, and the joint venture 

officially began operations in December 2006. ULA successfully 

consolidated Atlas V and Delta IV production and launch operations, 

despite many uncertainties at the time, and the joint venture contributed 

to unparalleled EELV mission success. According to DOD, the EELV 

program was focused on mission success—not cost control—in the 

ensuing years, until budget preparations in 2010, when DOD officials 

predicted EELV program costs would increase at an unsustainable rate. 

The predicted cost growth was due to possible instabilities in the launch 

industrial base, and according to DOD officials, the inefficient buying 

practice of purchasing one vehicle at a time.

In light of significant increases in EELV program costs estimates, DOD 

recognized the need to reorganize the way it acquired launch services. 

DOD officials conducted or commissioned several studies to evaluate 

alternatives to its EELV business model, among other things, and to 

contribute to the development a new EELV acquisition strategy. We 

reported in September 2011 that DOD needed to ensure the new 

acquisition strategy was based on sufficient information, and we made 

seven recommendations to the Secretary of Defense to assist in 

furthering this goal. DOD generally concurred with our 
recommendations.

4

In addition to revising the acquisition strategy, DOD undertook significant 

efforts to obtain greater insight into program costs in advance of recent 

contract negotiations with ULA. For example, DOD officials and the 

National Reconnaissance Office cost analysis group collected detailed 

data on engine prices and subcontractor costs, which DOD had not 

previously looked into. DOD also scrutinized launch processes to identify 

and eliminate potentially redundant activities. As a result of these and 

other activities, DOD contracting officials had a stronger bargaining 

position to lower overall contract costs than in previous negotiations, and 

in December 2013, DOD signed a contract modification with ULA, 

committing the government to buy 35 launch vehicle booster cores over a 

five-year period, and the associated capability to launch them.

Additionally, we reported that introducing competition 

into the EELV program could incentivize ULA pricing and efficiencies, 

potentially yielding cost savings to the government. DOD’s new EELV 

acquisition strategy was finalized in November 2011. It was designed 

among other things to maintain mission success, stabilize the U.S. launch 

industrial base, reduce launch costs, and allow competition for launch 

contract awards. The 2011 EELV acquisition strategy advocated a steady 

launch vehicle production rate that would yield both economic benefits to 

the government through larger lot buys of vehicles, and a predictable 

production tempo over time to help stabilize the launch industrial base. It 

also introduced the government’s intent to allow competition in the EELV 

program.

5

 

4 GAO, Evolved Expendable Launch Vehicle: DOD Needs to Ensure New Acquisition 

Strategy Is Based on Sufficient Information, 

The new 

contract represents significant effort on the part of DOD to negotiate 

better launch prices through its improved knowledge of contractor costs, 

and is expected to realize significant savings primarily through stable unit 

pricing for all launch vehicles. The new contract is also expected to 

provide DOD with a better understanding of individual launch costs than it 

had under previous contracts, as some costs are now directly attributable 

to specific launches, such as propellants, transportation, and costs 

associated with launch mission integration. Greater understanding of 

GAO-11-641 (Washington, D.C.: Sept. 15, 

2011). 

5 The booster core is the main body of a launch vehicle. In the EELV program, common 

booster cores are used to build all of the Atlas V and Delta IV launch vehicles. Medium 

and intermediate launch vehicles use one core each, while the Delta IV Heavy launch 

vehicle requires three.
individual launch costs would likely prove beneficial in comparing launch 

proposals from ULA and other potential launch providers as part of the 

DOD-led competition for up to 14 additional launches, expected to begin 

in fiscal year 2015.

DOD’s competition for up to 14 launches representing specific EELVclass missions that are to start launching beginning in fiscal year 2017 is 

intended to be open to any launch provider certified to compete for 

national security space launches.6 There are currently several new 

entrants in varying stages of the DOD launch vehicle certification process 

that may be poised to compete for these missions. If no new entrants are 

certified in time to compete, DOD plans to award the launches to ULA. 

DOD officials told us they intend to use a best value approach in 

evaluating offers from all competitors, meaning that factors in addition to 

price will be considered. For example, DOD may also consider mission 

risk, taking past performance into account, and satellite vehicle 

integration risks, including the complexity of integrating the intended 

satellite or sensor onto each company’s launch vehicle. DOD is currently 

developing its methodology for comparing launch proposals, including 

establishing how proposals are to be structured, and what the specific 

evaluation criteria will be. DOD is considering several ways to structure 

the proposals. If DOD requires offers to contain both fixed-price and costreimbursement features for launch services and capability, respectively, 

similar to the way it currently contracts with ULA, there could be benefits 

to DOD and ULA, but potential burdens to new entrants. Alternatively, if 

DOD implements a fixed-price commercial approach to the launch 

proposals, DOD could lose insight into contractor cost or pricing, because 

of the less-restrictive data requirements imposed on commercial 

acquisitions by the Federal Acquisition Regulation.7

 

6 Launch providers can become certified by following the steps outlined in the 2011 Air 

Force Launch Services New Entrant Certification Guide.

That is, companies 

cannot be required to submit cost or pricing data under a commercial item 

acquisition. DOD could also require a combination of elements from each 

of these approaches, or develop new contract requirements for this 

7 Federal Acquisition Regulation Part 12 outlines processes for acquiring commercial 

items, which are defined as items that are customarily used by the general public or by 

non-governmental entities for purposes other than governmental purposes. Some features 

of FAR Part 12 contracts include less insight into cost or pricing data, and fixed-price 

contract types.

The Upcoming EELV 

Launch Competition 

and Implications of 

Potential Approaches
competition. We examined key benefits and challenges of the first two 

approaches, as they relate to DOD, ULA and launch companies that 

would be new entrants. Table 1 summarizes the benefits and challenges 

to each entity of these two approaches.

Table 1: Potential Procurement Approaches DOD is Considering for Competitive Launch Contract Awards

Combined Fixed-price Launch Services/CostReimbursement Launch Capability Fixed-price Commercial

Benefits Challenges Benefits Challenges

DOD DOD is familiar with this 

approach and has 

experience negotiating under 

these terms

DOD retains some insight 

into contractor cost or pricing 

data which could lend itself to 

a better bargaining position 

in future contract 

negotiations

By requiring all companies to 

submit offers using this 

structure, DOD would have a 

straightforward basis on 

which to compare proposals

DOD use of a cost type 

contract may negate some 

efficient contractor business 

practices and cost savings 

due to government data 

requirements under this 

approach

DOD could end up paying for 

launch capability at more 

than one launch provider 

Cost of contract is identified 

at the time of award

Full and open competition 

could help to decrease 

launch prices and increase 

efficiencies

Could facilitate a uniform 

comparison of launch vehicle

prices between companies 

DOD access to contractor 

cost or pricing data would be 

very limited

DOD may lose some 

flexibility in rescheduling 

launches if satellite deliveries 

slip; rearranging launch 

manifest could add cost

Demand for EELV-class 

launches may diminish after 

2018; launch market may not 

sustain more than one 

provider

United 

Launch 

Alliance 

(ULA)

DOD funds ULA launch 

capability to 8 launches; ULA 

could offer only the additional 

cost to launch any vehicle 

above the 8 launches DOD 

has paid for, giving ULA a 

price advantage over new 

entrants

ULA would likely get the 

benefit of a long history of 

launch successes

ULA is familiar with DOD 

satellite integration 

requirements, given its role 

as the EELV program’s sole 

launch provider

None identified ULA could phase out 

business systems fulfilling 

government cost or pricing 

data requirements, 

potentially reducing 

expenses

ULA’s price offer could be 

higher than new entrant 

offers, as:

• ULA previously stood up 

business systems to 

fulfill government cost or 

pricing data 

requirements, which 

would not be required of 

new entrants under this 

approach

• ULA developed, 

demonstrated and 

continues to launch 

heavy launch vehicles, 

the most expensive 

vehicles to build and 

launch; new entrants are 

not required to develop 

and build heavy launch 

vehicles for this 

competition
Combined Fixed-price Launch Services/CostReimbursement Launch Capability Fixed-price Commercial

New 

Entrants 

New entrants are not 

required to develop and 

demonstrate heavy vehicles 

to compete for the 14 

launches; this could give 

them a price advantage over 

ULA

Federal Acquisition 

Regulation prohibits a lack of 

past performance from being 

counted against new entrants

DOD does not fund launch 

capability for new entrants; 

this could give ULA a price 

advantage over new entrants

Including a costreimbursement portion in 

new entrant launch proposals 

would require new entrants 

to develop and install new 

business systems to fulfill 

government data 

requirements

New entrant price offers 

could be lower than ULA’s, 

as:

No added government cost 

or pricing data requirements 

would allow companies to 

keep current business 

practices

Focusing the competition on 

price considerations without 

accounting for launch 

capability costs could help 

prevent new entrant price 

offers from rising

None identified

Source: GAO Summary

DOD expects to competitively award launch contracts for these launches 

through fiscal year 2017, which also represents the intended end of the 

five-year contract with ULA. After that, DOD anticipates full and open 

competition for launch services, provided there is more than one certified 

launch provider. One issue that may resurface at that time is whether 

there will be enough government and commercial demand for launch 

services to sustain more than one provider, or whether DOD should focus 

on a single best provider.

Chairman Durbin, Ranking Member Cochran, and Members of the 

Subcommittee, this concludes my statement. I will be happy to answer 

any questions that you or other Members of the Subcommittee have at 

this time.

For questions about this statement, please contact Cristina Chaplain at 

(202) 512-4841, or at chaplainc@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this statement. Individuals making key contributions to this 

testimony were Art Gallegos, Assistant Director; Pete Anderson, Claire 

Buck, Raj Chitikila, Laura Hook, and John Krump.

(121189)

GAO Contact and 

Staff 

Acknowledgments

(121177)
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